Bitcoin Bounces as Fed Announces Emergency Rate Cut

Bitcoin Bounces as Fed Announces Emergency Rate Cut

In one of the craziest weeks in financial market history, the Fed has announced emergency economic stimulus to counter negative impacts from Covid-19. Shortly after, Bitcoin price bounced briefly above $8,900 before correcting.

Did the Fed’s announcement pump Bitcoin price almost $200?

Bitcoin has seemingly had a positive reaction to the Fed’s announcement of emergency stimulus to counteract the negative effects of the Covid-19 outbreak as new cases have been discovered in the US.

The Fed has reassessed its outlook on the economy, which it believes has materially changed due to the spread of the Coronavirus in the US. Reports of the first infection related fatalities have started to emerge, and new cases are also being discovered.

While Fed chief Jerome Powell cited low unemployment, rising wages, and other strengths in the US economy, the Fed still cut borrowing rates by 50 basis points to reinforce the economy against any systemic risk from the viral outbreak.

Bitcoin also appeared to bounce during the announcement, causing crypto traders to question whether the cryptocurrency is still as uncorrelated as it seems. Just as the Fed released their statement, Bitcoin rose almost $200 dollars in price and topped out at $8910 before retracing.

The Fed’s announcement may have inspired the spike in Bitcoin’s prices as investors reacted with positive sentiment. After the Federal Reserve induced pump, Bitcoin has corrected and currently sits back at $8700.

China & Europe also consider Covid-19 Stimulus and relief

The Federal Reserve had a conference call with other G-7 nations to coordinate a relief effort for the markets. China has also recently announced that they will be providing economic stimulus for businesses affected by the Covid-19 impact.

China’s stimulus package will focus on small and medium sized businesses to provide relief in an effort to get the economy back on track. It is reported that the Chinese economy is currently running at 50% capacity, in the wake of the coronavirus outbreak.

Critics of the policy warn that stimulus could provide short term relief at the cost of longer term issues, but will not solve supply-side problems.

European nations are also in talks in preparation of implementing a coordinated response to Covid-19 through fiscal stimulus. The Organisation for Economic Co-operation and Development (OECD) has cut growth projections due to the impact of the illness.

EU finance ministers will be speaking on March 4th to plan a coordinated response form the EU’s 27 member states. They are ready to use all available policy options to safeguard the EU’s markets from risk.

Do you think the Fed’s interest rate cut and Bitcoin’s bounce are correlated? Let us know in the comments!